Monthly Archives: August 2011

Gottex Fund Management

Max Gottschalk, Co-Founder and Head of Asia Pacific, Gottex Fund Management

 

Can you tell us a bit about Gottex?
Gottex Fund Management is a global alternative asset management and advisory firm. Founded in 1992, Gottex has US$8.9 billion in total fee-earning assets as at 30 June 2011. We offer a variety of investment products and related services to institutional investors across the world. We employ 109 professionals, including over 30 investment professionals, in six offices located across three continents. This allows us to combine in-depth local knowledge of financial markets and investors with the strength of a global presence and infrastructure.

 

What is your own background?
I joined Gottex in 1998 and co-founded its fund of hedge fund business. I am a member of Gottex’s management and investment committee and currently run Gottex’s Asia business. Prior to Gottex, I worked at Bear Stearns & Co in New York where I was responsible for looking after hedge funds on the fixed income derivatives desk. I have a business degree from the University of Virginia and was part of the junior Swiss ski team having been brought up in Switzerland.

 

Describe your investment strategy and why it differs from what other fund managers are doing.
Our products are principally focused on relative value and arbitrage strategies leveraging our deep bench of investment professionals who have come from various trading and prop desks on Wall Street. We have designed products that exhibit low correlations with traditional markets which meet the need of our institutional clients that are looking to diversify from equities and bonds. We differ in that we don’t invest in managers that take outright directional bets and therefore limit ourselves to a smaller part of the hedge fund universe.

 

How has Gottex’s approach to risk management changed in recent times?
We always had a strong emphasis on risk management coming from a trading background. We have been developing our own tools for risk management for over a decade now and believe that we have a very unique approach to looking at risk in our industry which enable us to monitor most of our hedge fund investments on a real-time basis and to be proactive in our portfolio construction/management. We always look at ways to improve our risk system and have made a number of improvements since the crisis. A key change to our investment approach since the crisis has been the increased use of hedge fund managed accounts, which provides us with far greater control and transparency over our investments.

 

Do you see changes in regulation as a threat or an opportunity?
Regulations increases the barriers to entry and are aimed at protecting investors and markets. So although it may require adjustments and additional disclosure and expenditures, I believe that regulation will be good for our industry medium to long term as it should give investors greater
comfort in investing in hedge funds.

 

Fundraising in Asia: as Asian investors increase their hedge fund allocations, do you think Asian managers will start to benefit more or will big global fund managers get most of the assets?
Asian’s investors as a whole are still under allocated to alternatives compared to their US and European counterparts which offers some interesting fund raising opportunities for global managers like Gottex. We also see an increased level of interest by foreign investors looking for Asia-based investments. I believe that a large portion of assets raised out of Asia will be allocated to global products.

 

Why did you recently choose to relocate to Hong Kong?
The world’s economic engine is in Asia and I believe it offers firms like Gottex great opportunities to expand as the asset management industry grows and become more mature. Hong Kong is strategically well positioned, business friendly and offers easy access to the region.

 

What would you have done if you hadn’t been working in a fund management company?
It’s a difficult question as I have been passionate about the investment management industry since I was a kid. I have always been intrigued by the way the world works and economics. I am also an avid sportsman and music lover and could have very easily pursued careers there, but finance was my vocation.

 (Aug 2011)

Stats Investment Management

Yhu Kuni, Fund Manager, Stats Investment Management

 

Can you tell us a bit about Stats Investment Management?
Stats Investment Management is an independent boutique investment manager in Tokyo founded in 2005. Our mission is to provide unique alternative investment products designed to provide
stable positive returns and match demands from various institutions such as pension funds, family offices, financial institutions, fund of funds and corporate clients. The team consists of 11 skilled professionals who have previously worked at major foreign and domestic financial institutions in Tokyo. Our main investment strategy, Ginga Service Sector Fund, has consistently performed double digit annualised returns since inception in 2006. Performance for all years has been positive. The fund was nominated for the Best Japan Hedge Fund category in the 2009 Asian Hedge Awards and the Japan category in the 2010 AsiaHedge Awards. The strategy is managed by Toru Hashizume, CIO. Prior to Stats, Hashizume managed Japanese investment trusts including their flagship active equity fund as a Chief Portfolio Manager at Mitsubishi UFJ Asset Management for 9 years, and earlier was a sell-side analyst at Yamaichi Research Institute (research arm of the brokerage) for 7 years.

 

Describe your investment strategy and why it differs from what other fund managers are doing.
As the name implies, the fund is a sector focus fund heavily invested in IT-oriented service industries in Japan. We believe the investment universe is populated with rich alpha opportunities due to the highly competitive business environment with rapid developments constantly changing the industry picture. By continuously, regularly and constantly focusing research on these sectors, we believe we can identify individual mispricing opportunities arising from frequent valuation gaps and earnings volatility earlier than other market participants. We believe our accumulated research efforts and investment experience in this field is our competitive edge in providing unique uncorrelated returns to investors.

 

What investment themes in Asia do you see as the most attractive at the moment?
Within Japan, the current investment environment has been largely influenced by external factors and global macro uncertainties. This may sound negative for stock pickers but as this environment
also provides volatility, we can pick up individual mispricings from an abundant pool of selections based on medium-term fundamentals and aim to reap large alpha returns going forward.

 

How has your approach to risk management changed in recent times?
In addition to our regular weekly risk management meetings, we hold daily meetings in times of major macro events such as the most recent East-Japan earthquake. Not only do we closely monitor the risk measures and discuss the portfolio risk levels to protect capital and minimise downside but we are also focused on repositioning the portfolio to maximise the potential alpha returns as the market gradually returns to normal conditions. We believe proper portfolio risk management has been one of our strong points for offering stable alpha returns regardless of market situation.

 

Do you see changes in regulation as a threat or an opportunity?
As the Japanese hedge fund industry is still developing, whether regulation may stimulate or restrict growth would be seen in the medium-term.

 

Fundraising in Asia: as Asian investors increase their hedge fund allocations, do you think Asian managers will start to benefit more or will big global fund managers get most of the assets?
We certainly would like to see investors select Japanese fund managers based on skill and results regardless of company AUM.

 

What impact did the March disasters in Japan have on your business?
After the East-Japan earthquake on Friday 11th March, we quickly reduced the portfolio’s gross and net exposures on the following Monday in light of the many unforeseeable risks at the time.
We believe a combination of the quick reaction and rebalancing efforts in the second half minimised our monthly loss. We have received positive feedback from investors for our transparency and detailed information updates and have since then continued business as usual.

 

What would you have done if you hadn’t been a fund manager?
Perhaps something completely unrelated, like opening a ramen shop.

(Aug 2011)

GCS Capital Management

Stephen Satchell, Managing Partner, GCS Capital Management

 

Can you tell us a bit about GCS Capital Management?
GCS Capital Management is a Singapore-based investment advisor that was founded in 2009. The firm manages private investment funds across the credit, special situations, and illiquid investment markets of Asia, with a particular focus on private lending transactions and leveraged issuers. GCS Capital Management currently manages two funds with an excess of $US50 million of assets under management.

 

What is your own background?
Prior to establishing GCS Capital, I was the head of the proprietary credit trading business in Asia for Credit Suisse.

 

Describe your investment strategy and why it differs from what other fund managers are doing.
The investment strategy is credit and the niche is special situations and private lending. What differentiates GCS from most other credit managers is its focus on the illiquid section of the market.

Investors in almost all asset classes (credit, equity, commodities, etc.) are strongly skewed toward the liquid part of the market. This presents opportunities for those willing to enter into transactions that are not as liquid as public bonds. For borrowers who are tapping thimarket, they are paying a massive premium relative to risk. The goal is to be significantly overpaid to do illiquid transactions.

 

What investment themes in Asia do you see as the most attractive at the moment?
Asia will be driven by two factors: the ongoing slumps in Europe and the US combined with medium term outlook for a slowdown of growth in China (soft vs. hard landing).

 

How has your approach to risk management changed in recenttimes?
In our case, not that much. As an investor in illiquid transactions, as has always been the case, almost all risk management comes to bear prior to entering a transaction.

 

Do you see changes in regulation as a threat or an opportunity?
We just see it as a cost. Increased regulation and therefore increased costs are a given. Larger firms will obviously be able to spread these costs over a larger AUM base. As a firm that will always

look to stay relatively small, increased regulation is just a known cost for the future.

 

Fundraising in Asia: as Asian investors increase their hedge fund allocations, do you think Asian managers will start to benefit more or will big global fund managers get most of the assets?
As the number and quality of Asian investment managers increase, I see them taking a larger proportion of allocations from Asian investors (relative to the past). However, the large global
institutions will always get the bulk as they can provide stability over returns.

 

Why have you chosen to operate from Singapore?
GCS Capital chose Singapore for three reasons. As our due diligence process requires on-site analysis, Singapore is great as it is centrally located to the markets where we transact the most
(Australia, Indonesia, India, and China). It is a base for the originators and structurers of the deals that we enter into, so meeting with people is easy. And Singapore has an efficient business and regulatory environment for investment advisors.

 

What would you have done if you hadn’t been a fund manager?
If some university would take me, I would have liked to have been a university history professor.

(Aug 2011)

Bamboo Capital

Alexander Ries, Founder and Managing Director, Bamboo Capital

Can you tell us a bit about Bamboo Capital?
Bamboo Capital is a CTA/managed futures type of hedge fund management company. We trade futures and liquid foreign exchange markets. We develop our own models to identify and exploit

patterns and trends in the prices of the instruments we trade.

 

Describe your investment strategy and why it differs from what other fund managers are doing?
The large majority of fund companies in Asia are discretionary long/short equity funds. Firstly, as mentioned above, our investing universe comprises the most liquid commodity and financial futures, not equities. Secondly, we are not discretionary but use quantitative models in a systematic way. For example, 80% of our models are trend following in nature, so if our investors see the price of gold go from $1,000 to $1,600 they know we will have taken a big chunk out of that move.

 

What investment themes in Asia do you see as the most attractive at the moment?
Although we trade Asian equity index and commodity futures, we do not have a specifically Asian focus.

 

How has your approach to risk management changed in recent times?
Our approach has not changed. Just as we use models to identify trading opportunities, our market risk is also managed by systematic models. These models adapt to market conditions and performed as they were designed to do, for example during the recent earthquake in Japan. However since 2008 we are more aware of counterparty risk, although given the universe of instruments we trade, we only have to worry about our broker, cash custodian and exchanges.

 

Do you see regulation as a threat or an opportunity?
A threat. Unless one is in the business of regulatory arbitrage, compliance with extra regulation is nothing but a direct cost with no benefit, although we agree with the new MAS requirement for an
independent fund administrator/custodian/auditor setup to avoid Madoff situations.

 

Fund raising in Asia: as Asian investors increase their hedge fund allocations, do you think Asian managers will start to benefit more or will global fund managers get most of the assets?
With brand consciousness such an important factor in Asia, this is not an easy environment for a small hedge fund. Global fund managers and large Asian companies will benefit most.

 

Why have you chosen to operate from Singapore?
A) Because the market was new and the strategy used by Bamboo Capital was under represented here and so we felt there was an opportunity.

B) Because the regulatory and business environment were very conducive.

C) For personal reasons.

 

What would you have done if you hadn’t been a fund manager?
Become one.

(Aug 2011)

Orix Investment Corporation

Atsuhiro Mori, Chief Trader, Orix Investment Corporation

 

Can you tell us a bit about the trading group at Orix Investment Corporation?

We are four members in the trading/portfolio management group. We design and develop our own trading systems for mid- to long-term trend-following and diversified. We had been trading in managed accounts by ourselves mainly for US CPOs and prop funds since 1995 and now we mainly do trading advised by daily signals generated from our proprietary trading systems for GCI Investment Management in Singapore, who is the investment manager of the Orix Commodities Fund since June 2010. I am chief trader and portfolio manager with 15 years’ experience as a CTA. There are two senior traders including me who mainly design and develop trading systems and do research. Additionally we have an associate trader doing research and an associate for trading systems operation and administration.

 

You joined Orix early in your career and trained with Commodities Corporation in the US in the early 1990s – what has that experience meant for you?

I leaned a lot about trading from Commodities Corporation (CC) in the 1990s. CC was a pioneer in CTA and futures trading and it has much know-how about developing successful trading. CC’s philosophy is to allocate to a trader in the early stage of his career. CC had the Trader Evaluation Program; a training program for associate traders. It included mathematical evaluation (ROR, drawdown allocation, etc) but also evaluated traders’ originality, philosophy and consistency. When I was an associate trader, I could develop my original trading systems. There were plenty of infrastructure and resources (library, data and technology) available and good incentive fees for senior traders. In 1994 there were over 20 associate traders when I was at CC. We exchanged trading ideas and helped each other’s development at CC. There were also a few trader mentors. We could ask them about anything we wanted. Independent traders and other famous persons sometimes visited CC and held lectures for associates. CC tried to create the best environment so that associate traders like me could concentrate on their own trading and development. I liked CC in the 1990s very much and I still have many relationships with old CC people.

 

Describe your investment strategy and why it differs from what other fund managers are doing.

We are a CTA/managed futures manager. Our trading style is medium-term trend-following, systematic and diversified. Our portfolio has lots of Asia/Japan instruments (currently 25% on average). We have 15 years’ experience and good and long-established relationships with local brokers in Asia/Japan. We may limit allocation if we judge that our best diversification with Asia/Japan or other small markets will be difficult. Our target is the early stage in a trend. We diversify with several trading models. They are designed to be uncorrelated to each other in difficult periods for typical trend-followers. However they are correlated and all profitable during many strongly trending periods. The drawdown from the peak of a trend is expected be smaller than many other long-term trend-following methods.

 

What investment themes in the commodities space do you see as the most attractive at the moment?

The commodity markets are becoming more popular markets for many investors. Some commodities sometimes is “financialised” and move not by its own fundamentals or supply/demand concerns. In this meaning, some of them may become more volatile. But we are consistent; following the trend if it is up or down. Our investment theme is better diversification and to follow the trends.

 

How has your approach to risk management changed in recent times?

Our main risk management approach hasn’t been changed in recent times. Our risk management strategy built in the systems has been designed by very long-term and robust simulation. We often check or review our approach but it needs robust results in long-term simulation. We always look for new markets especially in Asia for better diversification.

 

Do you see changes in regulation as a threat or an opportunity?

The recent Dodd-Frank Act may impact some hedge funds or big trading firms. But in my opinion, CTA is the longest successful strategy in alternative investments. Many CTA strategies are very simple; following trends. And they trade exchange traded futures. It is already very transparent and has enough liquidity. They won’t be influenced much by new regulation. But it will impact big trading firms if they have to open big positions in smaller futures market. Or it will be difficult for them to trade some markets if the position limits become tighter. In Asian markets, some countries are very positive to open new exchanges and new instruments. Many of them try to introduce American style and investor-friendly methods into their trading rules or systems. Some emerging countries will also be expected to be fully open and operating to global standards. I hope all Japanese stock/commodity exchanges must follow this trend and cooperate together. Hopefully they will be more friendly to investors and be more positive to make Japanese exchanges more appealing to the world.

 

What would you have done if you hadn’t been a fund manager?

I would be a buy-side institutional investor. It was (and still is) the most probable job for me. Otherwise I was interested in managing a sports team. I would be general manager of a professional soccer or baseball team (Orix has professional baseball team in Japan). Or I want to help many young soccer players to go to European teams too. Like CC, I am good at spotting a good player early in his career and I may be good at selling without serious drawdowns. But maybe
this cannot be done systematically as players are human.

(Aug 2011)

Four Elements Capital

Lionel Semonin, Founder and Managing Director, Four Elements Capital

Can you tell us a bit about Four Elements?
Four Elements Capital (4ECAP) was founded in Singapore in October 2008 by a team of ex-BNP/ex-JP Morgan traders and to be entirely dedicated to commodity investing. Since then the team has grown to 12 employees (including 2 consultants) and is trading more than 40 commodities globally. Our flagship fund – the Earth Element Fund (EEF) – is up an estimated 3.5% as of end of July 2011.

 

What is your own background?
I have been in the investment industry for over 15 years and most recently I was responsible in London for building the global commodity investor business at JP Morgan and BNP Paribas, supervising directly research, trading and business development of commodity based-systematic strategies. Bertrand Egsbaek and Marion Lefèvre, who both joined me to found 4ECAP, brought respectively their investment and fund management experience and commodities and quantitative know-how.

 

Describe your investment strategy and why it differs from what other fund managers are doing.
Our investment strategy is systematic fundamental. Systematic as the investment approach is fully quantitative and we therefore position ourselves in the CTA space. However, we differ from what a
majority of CTAs are doing, by focusing on commodity futures only (no equity, interest rates or foreign exchange) and also because quantitative approach is applied to commodity-specific fundamental information and expertise.

 

What investment themes in Asia do you see as the most attractive at the moment?
We believe that one of the most interesting investment themes in Asia these days (and for a while) is the long-term – inexorable – increase in commodity prices and volatility and how developing
countries (not only in Asia) will cope with it.

 

How has your approach to risk management changed in recent times?
After the sharp price action of May – in particular in the energy sector –, we have diversified the scope of our energy strategies in the EEF by 1) shortening the time horizon of our strategies, 2)
increasing intraday trading strategies and 3) increasing the capital allocation on relative value trades.

 

Fundraising in Asia: as Asian investors increase their hedge fund allocations, do you think Asian managers will start to benefit more or will big global fund managers get most of the assets?
The current trend seems to still be in favour of the big global fund managers. Asian investors seem to be less interested by local talents than European or American investors are in Asian start-ups. It
is a surprising outcome that investors do not see the value of smaller funds not only from a diversification but as well from a liquidity perspective. Lastly – in the commodity space – it seems smaller funds like ourselves have been able to play their cards right in terms of performance and volatility.

 

Why have you chosen to operate from Singapore?
We have chosen to setup our company in 2008 with US$ 2.5 million in capital. At that time we were already very aware of the importance of cost control while choosing to operate from a country/city
that had a strong financial system and credibility. Singapore offered all this while providing us with a relative shorter time to market for the setup, a proximity to the Asian investor base and a certain importance as a commodity trading hub.

 

What would you have done if you hadn’t been a fund manager?
I have a tendency to never look back. Leaving the sell-side to be an independent fund manager in the last few years was an extraordinary entrepreneurial experience that moved the whole team outside their comfort zone: In the hedge fund business, too big to fail does not exist!

(Aug 2011)

Penjing Asset Management

Ronnie Wu, Partner and CIO, Penjing Asset Management

 

Can you tell us a bit about Penjing Asset Management?
Founded in March 2005, Penjing is an independent asset management firm specialised in Asian hedge fund investments. I previously worked for JP Morgan Chase, UBS and Vision FoF and I am now the CIO of Penjing. I am backed by a team of 9 investment professionals which the key investment professional have average 11 years of FoFs management experience. There are another 13 staff in the operations area performing legal and compliance, operations due diligence (ODD), investor relations, general administration and accounting functions. We manage around US$600 million of clients’ assets. A majority of our investors are institutions based outside of Asia.

 

Describe your investment strategy and why it differs from what other fund managers are doing.
We are absolute return oriented which means we aim at preserving capital while maximising “risk-adjusted” returns across the mandates and funds we manage. Our investment process is primarily bottom-up driven, i.e. doing intensive research on individual funds and managers to best understand their investment skills, edges and styles to determine if they are fit to be placed on our approved list of “investable universe”. Aside from ensuring the selection of the best-of-breed managers, we consciously add-value through allocation decisions in terms of strategy, asset classes, sectors, markets as well as position sizing. We are not afraid of investing in a hedge fund at its early stage if the manager can demonstrate its investment and business capability. Disciplined rotation to new talents enables Penjing to participate in managers’ start-up and growth phase of their business life cycles. We pride ourselves on the ODD capabilities through our hand-holding approach that benefited many new managers in their early stages.

 

What investment themes in Asia do you see as the most attractive at the moment?
The Penjing Asia Fund (“PAF”), our flagship Asian FoF program, invests across a diversified portfolio of hedge fund strategies, asset classes and geographies. For PAF, we intend to maintain abalance between market independent and equity long short strategies. At the same time, there are other funds with specific guidelines to cater for the diverse interests of our investors who may be seeking manager alpha and/or market beta in various proportion based on a targeted risk budget. At present, we favor managers excelling in Asian macro, volatility trading and stock pickers among others. The former two should benefit from the opportunities arisen from the sharp spikes in
volatility level and resultant dislocation across asset classes. After the broad equity market sell-off, the fundamental stock pickers would be able to go long on winners (good companies) at decent value and go short on losers ( companies with poor management and fundamentals) for alpha generation.

 

How has your approach to risk management changed in recent times?
Risk management is an integral part of our investment process. We are vigilant against any risk that would result in capital loss. After the global financial crisis of 2008, we have tightened our requirement on transparency and liquidity of underlying managers. Around 70% of our managers can be exited on a monthly basis and we do not normally invest in funds with hard lock-ups over 1 year. Our quantitative investment team responsible for tracking and monitoring manager and portfolio risk control parameters provides risk analysis and alerts for the portfolio team to consider appropriate actions.

 

Do you see changes in regulation as a threat or an opportunity?
We welcome regulation to enhance professional integrity, improvement in portfolio transparency and leveling of playing field etc. Nonetheless, regulating to the extent of adding complexity to operate an asset management business and hinder market clearing (through banning of short-selling) would not be a positive development for the financial industry as a whole not to mention hedge funds particularly.

 

Fundraising in Asia: as Asian investors increase their hedge fund allocations, do you think Asian managers will start to benefit more or will big global fund managers get most of the assets?
So far we have received more inquiries from investors based outside of Asia when compared to Asian based investors. Having said that, we are aware of increased interests in hedge fund allocations from sovereign wealth funds, family offices and insurance funds in the region. The key concern for these Asian super-investors is the current shortage of capacity to satisfy their appetite. From recent examples, managers with proven skill-sets can easily raise capital in Asia.

 

What would you have done if you hadn’t been running a fund management firm?
We have not given this topic a lot of thought since we all have been in the industry for a while. I think it is likely that we will run our own money and the only difference then is we only answer to ourselves.

(Aug 2011)

Darryl Flint’s credit team at Sparx is spinning out to set up Double Haven which will be on Dragonback’s hedge fund platform. The team currently manages about US$230m. The other team members are Kunal Saha, Torquil Macleod, Thomas Doud, Richard McDade and Arun Vaswani.

 

The Eurekahedge Japan Hedge Fund Index for July returned an estimated +0.52% which brings the YTD number to +1.48%.

 

The Eurekahedge Asia ex-Japan Hedge Fund Index for July returned an estimated +1.11% with a YTD of +0.19%.

 

 

Portfolio manager Radek Barnert has left Segantii Capital in Hong Kong.

 

Halina Chui has left Value Partners in Hong Kong.

 

 

Stewart Aldcroft has left EIP to join Citi’s global transaction services team based in Hong Kong.

 

Morgan Stanley has appointed former hedge fund manager Mehdee Reza as its new head of prime brokerage in Asia. Reza has been with Morgan Stanley since 2005 and has also worked at Credit
Suisse in Hong Kong.